KRG needs to cut oil exports to 370,000 bpd: Iraq Oil Minister

ERBIL, Kurdistan Region – The Kurdistan Region needs to reduce its oil exports to 370,000 barrels per day (bpd) to adhere to the OPEC+ agreement, Iraqi Oil Minister Ihsan Abdul-Jaber said on Sunday.

In a televised interview with al-Sharqiya TV, Abdul-Jaber said that Baghdad has officially sent a letter to the Kurdistan Regional Government (KRG) to inform them to reduce their oil exports to 370,000 bpd following similar pledges from Baghdad.

“We already started the talks, and I have informed Erbil that they need to start to implement the OPEC+ agreement and reduce production,” Abdul-Jaber said. 

According to data provided by Kurdistan Regional Government (KRG), Erbil exports between 450,000 to 470,000 thousand bpd.

For years, oil giants have coordinated their production benchmarks through a deal known as OPEC, or the Organization for Petroleum Exporting Countries. OPEC+ also includes non-member countries that export crude oil.

When global demand began to shrink as a result of the coronavirus outbreak, Saudi Arabia proposed cutting production to stabilize oil prices.

Russian oil companies, struggling to find buyers under US sanctions, refused to cut production. Saudi Arabia responded by flooding the market with cheap oil to strong-arm the Russians.

Moscow and Riyadh reached a deal on April 12 to cut oil production by 9.7 million bpd – equivalent to 10 percent of the world’s daily supply – for May and June. 

OPEC producers and allies agreed to continue the reduction until April next year. Iraq has also pledged to adhere to the agreement, which it has only partially achieved. 

“Iraq’s adherence to the OPEC+ agreement has been only 46 percent,” Abdul-Jaber said. “However, Iraq has started to gradually fully implementing the OPEC+ agreement, until it will be 100 percent,” he added. 

According to Iraq’s oil minister, Iraq exported 99 million barrels of oil during the month of May with an average price of $21, with prices expected to rise further next month. 

“We expect that the average price of a single Iraqi barrel to rise to $40 during July,” Abdul-Jaber said.

Iraq is to reduce production by 13 million barrels of oil this month in order to adhere to the agreement, according to the minister.

Oil revenue has long been a thorny issue between Erbil and Baghdad. The KRG has had an independent oil and gas sector since 2006, and began exporting its oil through a pipeline to Turkey for international markets in 2013. 

Then-Prime Minister of Iraq Nouri al-Maliki suspended the Kurdistan Region's share of the national budget in 2014 - disabling Erbil's ability to pay for the civil sector salaries of hundreds of thousands of employees.

Peshmerga forces took control of security in the disputed province of Kirkuk the same year, allowing the KRG to seize the province’s bountiful oilfields. When Iraqi forces retook the area in October 2017, the KRG lost around half of its oil revenues, compelling the government to suspend exports to Turkey for several months.

Erbil and Baghdad have continued to bicker over oil-for-budget agreements, with the KRG failing to hand over a pre-agreed amount of its oil in return for its share of the national budget last year. A long-contended 2020 budget share deal of 12.67 percent for the Kurdistan Region was agreed upon by the two parties in December 2019.

However the destructive economic impact of the coronavirus appears to have brought the two parties closer, with agreements made to develop Kurdistan Region gas fields to be used to generate the electricity needed to fill the country's shortfall.

A KRG delegation is expected to visit Baghdad on Tuesday to discuss the oil-for-budget agreement with Baghdad officials.

“Let’s look back into history, and ask ourselves:  what have we earned since 2013 in our tensions with Erbil? Did we gain any benefits, or any revenues? Of course not,” Abdul-Jaber added. 

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